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Preview of the Economics of Trump’s America

Mariam Samuel and Gareth Minson

The rise in popularity of the radical populist movement and Trump’s win in the election of 2016 proved evident the frustrations of many Americans with the state of the United States economy. Campaigns addressed these frustrations- proposing increased jobs, decreased taxes, and an overall focus on the middle class. The success of these campaigns would lead one to think the economy was in a terrible state, however, statistics show otherwise. At the heat of these frustrations, unemployment was falling and wages were following an upward trend. 2018 data shows wages are 2.5% higher and unemployment is below the natural rate of ~5%. Even more remarkably, it is lower than it has been in the past decade and is forecasted to remain low.

In December of 2017, unemployment numbers in California, Hawaii, and Mississippi were at their lowest since the data was tracked in 1976. Right now, Hawaii leads the nation with the lowest rate of unemployment as it currently rests at 2%. This is an example of the long term trend. Since the election (December 2016 – December 2017), 25 states have posted lower unemployment numbers and only 2 have reported higher. The national rate is only 4.1%. Only 5 states in December of 2017 reported unemployment rates greater than or equal to 5%. As the nation and individual states consistently post better and better numbers and wages rise, even if the rise is incremental, the overall picture is of a very healthy economy.

A healthy economy means that the Fed will continue to bring inflation in check. There are some in the Fed concerned that the low interest rates are the biggest threat to the future health of the economy. The job market trends well, but low interest rates may mean that the “printing money” approach may risk that health. While the consensus is that keeping the projected pace of three rate hikes this year will be enough for the economy’s future, the concern is still there. One possible question for those that just read about the economic collapse of the 70’s: is America on the brink of a similar situation, would it happen under the current administration, and can the new tax plan stave off any danger?

Resources:

Curdia, Vasco. “FRBSF FedViews: Current Economy and the Outlook.” Economist’s View 16 January 2018. http://economistsview.typepad.com/economistsview/2018/01/frbsf-fedviews-current-economy-and-the-outlook.html

Duy, Timothy, Phd. “Data Lining Up For The Fed’s Rate Hike Forecast.” Tim Duy’s Fed Watch 7 January 2018. https://blogs.uoregon.edu/timduyfedwatch/2018/01/07/data-lining-up-for-the-feds-rate-hike-forecast/

“State Employment and Unemployment Summary”. Bureau of Labor Statistics. 23 January 2018. https://blogs.uoregon.edu/timduyfedwatch/2018/01/07/data-lining-up-for-the-feds-rate-hike-forecast/

13 thoughts on “Preview of the Economics of Trump’s America

  1. bernsteinl20

    This really makes me wonder how much the president has control over what is happening in the economy? Does he (or she) really have as much control as we expect them to? Or, should we be looking more closely at appointments such as the head of the Federal Reserve to really see what the economic future of the country may look like.

    Reply
    1. the prof

      Our President has very little that he can do in a positive direction, as shifting expenditures and taxes requires Congress to act. Some Presidents have been able to sway Congress, some have not. In a negative direction, the President can bring chaos to the policy process both directly and through poor (or no!) appointments. Even there, it's hard to gauge whether the raft of empty positions and departures of experienced people will have a long-run impact.

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  2. dugganj20

    While a healthy economy does mean the Fed will keep inflation in check, I believe that even in unhealthy economies it is their job to try and keep inflation from straying far from where it is supposed to be. That being said, I do not think America is on the brink of another situation similar to that of the economic collapse of the 70s. Economists learn from mistakes of the past, and the fact that we are aware of what went wrong helps the government from preventing it from happening again.

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  3. dodsonm20

    How was the unemployment rate changing prior to Trump's presidency? I think that although any healthy span for the economy is vulnerable to weakening or even crashing but I don't know if it is fair to compare this time to that in the 1970s because the build up then had lasted for over 20 years. Our economy was in recession within the last decade so I don't know if it is appropriate to use the knowledge gained from that time now.

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  4. Molly Mann

    While unemployment rates continue to fall and wages rise, I still question what this means to the American people--specifically, the middle class and below. Does this accurately reflect those facing underemployment? What is the public opinion like in the wake of Trump's healthy economy?

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  5. riversc20

    I wonder if such low unemployment rates being found across the board in December is due to the trend of many businesses to take on on more workers during the holidays? An important aspect to consider is if the jobs these statistics imply are being created are long-term, sustainable jobs rather than temporary work becoming available. This can probably be seen by continuing to observe unemployment rates (do they drop after the new year, is there a lot of month-to-month fluctuation, etc.). I also find it notable to consider if this economic upturn is the doing of Trump and his administration or the benefits of policies from presidents before him finally being reaped.

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    1. samuelm20

      I also believe this economic upturn to very likely be the staggered result of President Obama's policies, but of course there is not a way to know for certain.

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  6. skinnerf20

    Based on the knowledge we have of economic cycles it makes sense that following the 08 recession there would be a climb back to good economic health. It will be interesting to see how Trump's policy of repealing regulations affects economic health over the next 2 years. If a new candidate is elected in 2020 who favors bringing those regulations back the economic changes that follow will be of interest.

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  7. ingramk20

    A lot of the working class individuals who supported Trump were in dying industries like coal and manufacturing. Trump targeted their economic anxiety and promised to revive these industries. However, we've learned that structural unemployment represents shifts in the economy and not of macroeconomic concern. It's interesting to see the overall state of the job market, which is in fact doing very well and greatly contrasts the narrative often portrayed by the media.

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  8. scottm20

    This preview does a good job of portraying the economic climate in a holistic manner. While the GOP and many Trump supporters like to attribute lofty statistics to the President’s policies, it is clear that the economy was at least trending in this direction before he took office. Not taking away from any of the remarkable growth we have seen since Trump assumed office, most notably the unemployment rate and stock market performance, it is interesting to decipher through data in an attempt to see how much of an effect our polarizing President has truly had on the economy. In terms of comparing the current economic climate to the collapse of the 70’s, I would say we are too embedded in current success to clearly make a judgement on our long term forecast. I do not believe we are on the brink of a similar crash, at least not for the next few years. With the Fed’s continuation of interest rate hikes and Trump’s new tax plan, I believe we should be able to sustain this economic climate for the foreseeable future. -Griffin Scott

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  9. calihanj20

    I think the economy is in a decent place right now. The unemployment rate seems to have found an equilibrium and the wage growth`is now steadily above inflation. Additionally, the labor force participation rate has flattened out over the past few years and is no longer decreasing. It has not bounced back to pre-recession levels, but this could be due to other factors such as progressive credentialism.

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  10. the prof

    The political economy questions are very challenging, after all Trump lost badly in the popular vote and benefitted from the incompetence of Clinton's campaign in ignoring key states and constituencies, including Bernie supporters. Lots of people voted Republican because that's what they've always done, they didn't vote Trump. So how many people were truly attracted by his populist message? Perhaps most important, if the labor market continues to improve, will the populist message lose electoral traction?
     
    I suggest you real Edward Luce, The Retreat of Western Liberalism. He spoke on campus earlier this term.

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  11. the prof

    In a different direction, we'll see later that the "natural rate of unemployment" and the similar "Non-Accelerating Inflation Rate of Unemployment" (NAIRU) are tied to what's happening to prices, eg, inflation as measured by the CPI. So if "the" natural rate is 5%, then by now we should be seeing a sharp uptick in inflation. Perhaps the theory is wrong, or the structure of the US economy has changed so that the past is a poor guide, or we are using the wrong measure of labor slack. Or some or all of those.
     
    Krugman presents this material later in the book. I'll hold off further discussion until then, but at least flag this issue, which some of you have touched upon (eg, Trip with the participation rate still below pre-Great-Recession levels, suggesting that "the unemployment rate" may not be the best measure).

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